Financial Performance Analysis
Gary C. Kelly
Chairman of the Board, President and CEO
Total Resource Network
Raquel Alston, Tanya Spencer and, Nicole Stenhouse
for BUS 515 Financial Management
Professor James Kerwin
October 3, 2011
Total Resource Network (TRN) congratulates Southwest Airlines for thirty-eight years of consecutive profitability. This is a major accomplishment that should be applauded especially during this economic recession and recovery period. Southwest’s success has been attributed to their core values and mission that begin with their employees and exceptional customer service. These two attributes along with low airfares have translated back into sound financial performances year after year. It would seem that Southwest is at a cruising altitude with so many multiple years of profitability. TRN understands that Southwest is always striving to elevate to a higher level with their employees, services, fares, and customers therefore an in depth financial analysis was conducted to evaluate Southwest’s financial health. The following financial ratios listed below, along with industry averages and Jet Blue financials, were utilized to gauge Southwest’s financial stability to champion your successes and review your challenges as opportunities.
|Liquidity |Current Ratio | | |Quick Ratio | |Efficiency |Inventory Turnover | | |Avg Coll Period | | |Fixed Asset Turnover | | |Total Asset Turnover | |Leverage |Debt Ratio | | |EBITDA | |Profitability |Gross Profit Margin | | |Net Profit Margin | | |Return on Assets | | |Return on Equity | |Market Value |Price/Earning Ratio | | |Market/Book Ratio |
Financial Ratio Comparisons
Southwest has been the leader in profitability in the airline industry since its inception while most airline companies are suffering and reporting losses, Southwest continues to show profits. Proving their strategy is benchmark, by continuing to keep the customer and employees the number one priority is the key to their success. Various financial ratios are utilized by managers and investors to analyze and forecast the liquidity, efficiency, leverage, profitability and, market value of a company and TRN believes that these ratios and comparisons will be beneficial to Southwest as the merger with Air Tran is completed. Liquidity
Southwest’s ability to pay off short term...
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